Trans-Pacific Partnership: A Done Deal
What is and what is not The Trans-Pacific Partnership?
For starters, the current Trans-Pacific Partnership (TPP) is a trade pact between 11 Pacific Rim nations. It is quite possibly the most important trade agreement reached in several decades and is the largest trade agreement ever completed in Asia. The agreement is expected to primarily reduce trade barriers among participating nations such as lowering tariffs on goods, as well as other things. The agreement consists of measures addressing labor and environmental rules, stronger legal protections to drug companies, lengthening the term of copyright protection, giving foreign investors a new way to challenge countries’ laws and regulations, and much more.
What it is not is the original 2005 agreement that the United States signed onto in early 2016 intending to expand U.S. trade and investment abroad in the Asia-Pacific region. One of the very first things President Trump did in office was to withdraw from the pact in January of 2017 in favor of the “America first” trade policy. Trump criticized the deal, claiming that it would push more manufacturing jobs overseas, increase the U.S. trade deficit, and fail to address currency manipulation by U.S. trade partners.
The Trans-Pacific Partnership will commence on December 30, displaying a new win for global trade, even with the US pushing out tariff barriers and stepping up its trade war with China. On Wednesday, the sixth nation to ratify the treaty for the 11-member deal to take effect took place. Australia decided to take the leap and be the sixth nation to ratify the treaty.
A great deal of items and measures will start with the enactment of this pact.
A noticeable effect will be on agriculture imports from Canada and Australia to Japan. The deal will slash tariffs on those imports which will profoundly interfere with US farmers. The disadvantage that US farmers are going to face will no doubt put tension on Washington to find some forms of concessions from Japan.
Among other things, there will be what is called a “high-standard” rule. The TPP establishes high-standard trade rules that level the playing field and open new opportunities such as the promotion of innovation to ensure strong environmental and labor standards, foster fair competition, transparency, and good governance. This measure will mainly effect growing economies more so, such as Vietnam. In the prior TPP there were also protections on intellectual property that mainly benefited US companies, but those were suspended after the US withdrawal.
Many of the pact’s nations believe that the deal would provide more access to international markets for its farmers, businesses, increase investment and potentially create jobs. Of those nations, some of the most spoken regarding positive economic aspects include Australia’s prime minister Scott Morrison and Canada’s prime minister Justin Trudeau.
The TPP, although now re-branded as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is attracting nations other than the six that ratified the trade pact.
Outside of the first six; Australia, Canada, Japan, Mexico, New Zealand, Singapore and the five countries yet to ratify; Brunei, Chile, Malaysia, Peru and Vietnam, there is increasing interest in joining. In particular the UK has shown an increasing interest that is being more than welcomed according to Shinzo Abe, Prime Minister of Japan. Earlier in October Mr. Shinzo Abe said he would welcome the UK “with open arms”. Being that the UK would lose its role as a gateway to Europe upon Brexit, it is still a country “equipped with global strength”.
Joining could be a way for Britain to strike new free-trade deals with a large and fast-growing chunk of the world economy in Asia. Although it is only be possible if the UK was to leave the EU customs union and gain the power to set its own tariffs.
Unlike the isolationist approach that is taken by President Trump, it appears that the 21st century global economy mindset of free and fair trade is spreading.
Global economist are still analyzing and developing forecasts for this trade deal, but the majority appear to be saying only positive things. It might make you think if it was wise for the US to withdraw from the deal, but the assertions of it being a poor decision by Mr. Trump may have some validity as seen in a report by the Peterson Institute for International Economics (PIEE). For example, by 2030, Brunei, Singapore and Vietnam have a proposed economic boost of at least 2%, while Malaysia’s economy is expected to grow by over 3%. In contrast, the boost to the US economy would have only been around 0.5%.
More close to home are the consumers. The price of many goods and services are expected to drop within CPTPP countries. The New Zealand Foreign Affairs and Trade Department is estimating that tariffs on New Zealand beef exports to Japan will be cut from 38.5% to just 9%, for example.
As well, tariffs on some products will disappear entirely. Trainers exported to Mexico would eventually become tariff-free, while things like tariffs on shampoo will be cut from 15% to 0%.
It is important to consider that these numbers are not set in stone, and we have yet to see what will actually take place. That is something we will have to wait to find out and see.
